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12 Investing and Business Gems from Avalon’s Kevin Kinsella

Current and former MIT students gathered at the Computer History Museum in Mountain View, CA, Tuesday night to hear one of San Diego’s most renowned venture investors, Avalon Ventures founder Kevin Kinsella, share insights from a long and adventurous career.

Fresh off Avalon’s huge Zynga payout—the firm invested $5.3 million and saw the value of its stake skyrocket to $340 million after Zynga’s December IPO—Kinsella and his partner Rich Levandov are looking like certified Midases. Their investment strategy, which cuts across tech and life sciences, today seems as canny as it is quirky. Which helps to explain why the audience sat rapt as David Schmittlein, dean of MIT’s Sloan School of Management, interviewed Kinsella about his investing philosophy and his views on markets like biotech and games.

“To be successful as a leader or manager, you have to make an investment in becoming an interesting person,” Schmittlein said as he introduced Kinsella. “A lot of people think that means you should become incredibly successful and then use the money to become interesting.” But that is not what Kinsella did, Schmittlein pointed out. Aside from founding Avalon back in 1983, the MIT management science graduate has done everything from advising the Peruvian government on nutrition programs to teaching algebra in Beirut to running international joint ventures for Caterpillar to, more recently, bankrolling the Broadway hit Jersey Boys and acquiring a Sonoma County winery.

Kinsella speaks with MIT students and alumni at the Computer History Museum

The Jersey Boys story, which Kinsella shared at length, was a revealing one, illustrating that Kinsella has invested from his gut as often as from his head. The son of Broadway and television actor Walter Kinsella, he was steeped in the theatre as a youth, and the passion has stayed with him. Kinsella said he attended a technical rehearsal for the Frankie Valli retrospective in La Jolla in 2005 and “from the first downbeat I was on the edge of my seat.” He insisted that he be allowed to invest in the show, and when a big Japanese investor later pulled out, he made up the difference, become the show’s largest backer—with famously positive results (the show won four Tony awards and the album went platinum). “The net is, go with your desire,” Kinsella said.

The Tuesday event was organized by MIT’s Sloan School of Management, the MIT Club of Northern California, and the Martin Trust Center for MIT Entrepreneurship, and capped off a week of visits by Sloan MBA students to technology companies and venture firms around Silicon Valley. I grabbed a few minutes with Kinsella after his talk with Schmittlein. Below is an edited amalgamation of the evening’s 12 juiciest on-stage and off-stage quotes.

On the search for original ideas: Avalon has not, historically, been in the me-too business. When you think about really successful companies, they are not repeating something other successful companies have done. You can’t invest in the rear-view mirror.

On the difference between biotech investing and tech investing: In therapeutics, all ideas are big ideas. You are curing a disease. Even [curing] an orphan disease is a big idea. The problem between you and capitalizing on that big idea is the FDA…We are thinking very differently about healthcare investments today because of the timeline it takes to get FDA approval. Venture partnerships are typically 10 years, and you need to start harvesting by the sixth year. [In drug development today] it’s too excruciatingly difficult and long and expensive to be able to do that.

On Avalon’s decision to invest in Zynga: What we liked was that clearly, Facebook was emerging as a novel platform on top of which things could be built—things you could do with your friends. We thought that was very clever. Mark [Pincus] had always made money for people in … Next Page »